The euro traded lower at $1.1750 on Tuesday as investors fear that rising cases of the COVID-19 disease across Europe could force governments in the region to re-impose lockdown measures and hamper the global economic recovery. Still, the euro remained close to an over two-year high of $1.20 hit in August supported by broad dollar weakness and a relief package agreed by EU leaders back in July.
EUR/USD is suffering the pick-up in the risk aversion sentiment among market participants, coming under exacerbated downside pressure and recording fresh multi-week lows in the proximity of 1.1730 at the same time.
This apparent change of heart towards the greenback seems sustained by rising concerns over the advance of the pandemic, US political uncertainty and the less clear scenario surrounding extra stimulus measures by the Federal Reserve.
On Tuesday, investors are expected to closely follow the first testimony by Chief Jerome Powell on the Fed’s response to the pandemic ahead of two other testimonies on Wednesday and Thursday. The dollar will, therefore, be under the microscope practically during the whole week.
Adding extra downside pressure to EUR/USD, ECB’s Christine Lagarde said on Monday that the central bank will be “attentive” to the appreciation of the single currency, diluting somewhat her comments at the latest ECB meeting, when she suggested market participants not to overreact to the (by then) appreciation of the euro.